In recent months, bankers' anti-credit union rhetoric has reached a fevered pitch. They have also gotten smarter and more creative with their message targeted to elected officials.
The bankers are telling their state legislators and members of Congress about "mega-credit unions" that have "morphed beyond their original tax-preferred purpose." The bankers' attack focuses on "the largest credit unions, most notably those that have aggressively used multiple and community common bonds to grow."
To many elected officials, mainstream journalists and other outside observers, these mega-morphing accusations will ring true.
The bankers lament to anyone who will listen that these "mega" credit unions have become indistinguishable from banks and should be taxed and regulated like banks. Usually fierce rivals, the American Bankers Association, America's Community Bankers and the Independent Community Bankers of America have even established a united front called the Inter-Trade Credit Union Coordinating Council designed to synchronize their efforts to strip "bank-like" credit unions of their tax exemption. Unfortunately for credit unions, this coordinated attack strategy has great potential for success.
Not Your Daddy's Caddy
Additionally, the bankers' critical focus on larger credit unions preys only too effectively on inherent divisions within the credit union community. Friction and conflict between "large" and "small" credit unions have existed since the beginnings of the credit union movement. In the early 1950s, this division was represented by the National Credit Union Management Conference, the members of which were exclusively credit unions of $1 million in assets or larger. The often-disparaging nickname for this group was the "Cadillac Club." Although it may be hard to believe by today's standards, at the time most credit unions were much smaller than $1 million.
Many credit unionists from the smaller credit unions resented those from the larger credit unions, often questioning their commitment to the true cause. As industries mature, it is not uncommon for diverse interests to emerge requiring diverse representation. Credit unions are no exception to this evolution.
By the end of 2004, there will be more than 100 credit unions with more than $1 billion in assets. The largest 250 credit unions will represent over 50% of all credit union assets and members. The largest 1,000 credit unions will represent well over 80%. What this means is that the vast majority of credit union members now belong to "mega-morphing" credit unions-and those numbers will continue to grow. Each of these members defines a credit union based upon his or her individual experience as a member of his or her specific credit union regardless of its asset size or whether the bankers call them mega-morphs. Mega morphing credit unions are US.
Any philosophical chastising or finger-pointing by leaders from small credit unions at their larger brothers and sisters will be extremely counterproductive and a horrible disservice to the vast majority of credit union members. Anyone, whether a banker or credit union leader, who believes that being a member of a small credit union is somehow a more "pure" experience than being a member of a large credit union doesn't understand the significance of these numbers. Very few credit union members will be exempt from the bankers' planned tax on credit unions.
Up until this point in time, national and state-level credit union association lobbyists have done an effective job keeping leaders from all size credit unions alert to the importance of a unified defense against bankers' attacks. However, the old strategies and tactics may not be sufficient to stem the tide of mega-morphing rhetoric and the bankers' surging political clout. The credit union trade associations rightly strive to serve the advocacy objectives of all of their members regardless of asset size, but will find common resolve more difficult to maintain under the stress of this new divide-and-conquer assault.
Disharmony Means Vulnerabilities
Any disharmony within the credit union ranks will translate into new vulnerabilities for larger credit unions. Leaders from large credit unions will increasingly see it as essential to the credit union's survival to have their own government affairs staff and/or contract lobbyists to protect their specific interests. All the large banks and the major players in many other industries have housed their own lobbying staff for years. The CUNA Mutual Group has maintained its own highly effective lobbying staff for a long time. Even credit union vendors have wisely hired former NCUA board members or other experienced credit union advocates to represent their specific interests in Washington and the statehouses.
This growth in the number of credit unions with their own lobbyists will give trade association lobbyists heartburn. They will worry about the potential impact on elected officials of receiving mixed messages about credit union objectives. Hopefully the credit union association community will embrace the inevitability of these new large credit union-sponsored lobbying troops and will effectively collaborate to protect credit union interests regardless of their diversity.
The bankers and their associations have decades of practice attacking credit unions in Congress and at the statehouses. The results of their past campaigns have been mixed, but can generally be described as insufficient. Today they are better organized, more focused and talking a better spin. The bankers' strategy is cleverly designed to drive a divisive wedge between credit unions based upon their size. It's a wedge that should be rejected by everyone who cares about the future of credit unions.
A 29-year credit union community veteran, Marvin Umholtz is President & CEO of Umholtz Consulting Services located in Castle Rock, Colorado. He can be reached at mumholtz
